Oct 24, 2011 | Management, Personal Rant, Small business
It seems to me that the geniuses making economy wide financial decisions around the world, but particularly in the US and Europe are making the same mistake many of my SME clients make. They are failing to distinguish between the short term, tactical decision making that can reshape a P&L in any given month, whilst ignoring the long term strategic decisions that shape the balance sheet.
What is the difference between giving Woolworths a big discount to enable a deep price cut on your product, then promptly turning around and borrowing to produce more, and the so called “Quantitative Easing” being practiced by the EU & US? Giving Woolies the discount may make the P&L look better for the month, but when the discount is borrowed, all you are doing is loading the balance sheet up with more debt that needs to be repaid at some point, or you go bankrupt.
You do not have to be a brain surgeon to understand that when the credit card is full, and the debt is bigger than the income, some radical spending surgery is required, partnered with an increase in the value extracted from every dollar that is still spent. Most consumers understand this, and manage it, those who do not, have their credit card taken away.
Why is it so hard?
Oct 17, 2011 | Management, Marketing, Small business
If imitation is the best form of flattery, domestic FMCG suppliers, the few left, should be very flattered indeed.
Any lingering doubts about the pressure being applied to them by the two retail gorillas should be blown away by this video from ad agency Mumbrella, which demonstrates the fine line between flattery and IP stealing.
This has happened in front of our eyes to one of our core manufacturing industries, and when the piper calls to be paid, it will prove to be very expensive indeed. There is so little packaged food manufacturing now being done in Australia that the industry is in real strife, I suspect scale is rapidly falling past the point of viability, and those left are under great pressure.
Perhaps the new ACCC chairman Rod Simms will follow up on his words that seem to indicate a different attitude to the retail duopoly than his predecessors.
Oct 14, 2011 | Customers, Management, Personal Rant, Small business
It seems that new ACCC chief Rod Sims is getting serious about the reality of the power of the two major supermarket retailers.
At the same time, Andrew Reitzer MD of Metcash is giving the ACCC a headache over his presumptive execution of the purchase of Franklins from Pick n’ Pay before the Federal court had ruled, simply on the basis that the business was bleeding cash, and the transaction had to be done, even at the risk of the consequences of an adverse finding.
An interview by Alan Kohler of Reitzer and the accompanying commentary give a great insight into the thinking behind the only real alternative to the power of Coles and Woolworths.
The overwhelming power of Coles and Woolworths has nevertheless not stopped the evolution of niche retailers like Harris Farm, competitive regional supermarkets like Drakes and Ritchies, and market entry of Aldi and Costco. The downward pressure on purchase price has however wrecked havoc on the Australian food manufacturing sector, with very few left, and those that are in pretty shallow water, with the only really large domestically owned manufacturer left, Goodman Fielder performing poorly.
I can only hope that in the new environment of more aggressive review of the retailers, that the plight of the domestic manufacturing sector is adequately considered.
Oct 12, 2011 | Management, Small business
This is a simple measure I try to foist on all my SME clients, the Monday morning “NCC meeting”. It is just as important to larger businesses, but my clients are mostly SME’s.
It involves a meeting of the key cash sensitive executives, (generally the MD, Beenie, Sales and Purchasing), and tabling a daily record of cash in and out, and rolling forecasts for the week and month to come. The participants table the decisions and expectations of the next week, and month, and looks at the cash consumption of week past. Very simple, 10 minutes when the routines are established, but a very valuable 10 minutes, as it surfaces potential cash problems before they bite .
Measuring the cash flow of a business is a bit like going to the doctor, the first thing he measures is your pulse and blood pressure, if these are OK, chances are the patient is OK, if not, look further. The NCC is the commercial equivalent, and anything that shows up here as being out of expectations requires further examination.
Sep 30, 2011 | Change, Leadership, Management, Operations, Personal Rant, Small business
The news that Fosters will be sold to SA Miller Brewing represents almost the last Australian food and beverage business with a global brand has now disappeared. I say almost, as I can think of no other, but some may argue that a few sales in Fiji or NZ constitutes global. To my mind, it does not rate.
Why is it that we seem to be unable to build and sustain food businesses from this country?.
Australia is now a net importer of packaged food, according to the AFGC 2010 report, and yet we are an abundant producer, particularly of broadacre commodities, grain and meat. Most people when told we are a net importer go into a state of disbelief, and yet the march of imported food, and the decline of Australia’s manufacturing base has been happening slowly over a long period.
It’s pretty easy to blame the evolution of globalisation of supply chains, the domination of Woolworths and Coles, regulation imposing costs overseas competitors do not have, the geographic spread and relatively sparse population denying the economies of scale, but the reality is that it is a management failure. The failure is shared by boards and shareholders who have tolerated a complacent management, discouraged long term strategy in the chase for short term returns, and simply disengaged with the basic drivers of competitiveness over a long period.
The only hope left is that a few SME’s will emerge from the heavily culled pack that remains, but it seems to me that they have missed the boat, and the barriers that the businesses that existed 30 years ago, and should have breasted, are now simply too high for the small guys to tackle without the scale and capital resources necessary. Our one hope is that there is a processing breakthrough, technologies like the CSIRO High Pressure Processing technology offer some hope, but they are unlikely to be the savior by themselves.
Almost gone, down to the last gasp, what on earth will we do then? Or don’t we care?
Sep 23, 2011 | Communication, Customers, Innovation, Small business, Social Media
Ask a SME manager in packaged goods, “would you like a phone call from Woolworths ordering stock of your new product for every store in the country?” and you will most likely get a tear with the nodded head.
Enter the “Orabrush” story, they got the call from Walmart without any of the usual begging.
There are many hurdles for SME’s in the packaged goods industry to jump before distribution in the major retailers can be obtained, and then the problems really start, because SME’s lack the resources to move the product off shelf before the trial period runs out.
Social media has helped over the past couple of years, you now have the opportunity to reach highly targeted groups of consumers, and deliver them a message, but generally it has not helped much to get the product on shelf in the first place.
Orabrush really broke the mass market model with a product I still find odd, but great creativity and lateral thinking combined with social media has turned the product into a hit, and can now be found in Walmart stores around the world
Have a look at the Youtube ads in the link, gems.
